This section gives a basic explanation of County Court proceedings. A more detailed explanation is available in the Debt advice for advisers section of the site.

If the officer of Debt Management and Banking is unable to recover your tax by legally taking possession of goods (formerly known as distraint) or through the Magistrates' Court, he will probably seek a judgment in the County Court, which orders you to pay the amount due.

If you still fail to pay, Debt Management and Banking will usually pass your file to the HM Revenue and Customs' Enforcement & Insolvency Service office to consider proceedings for bankruptcy. Unlike other creditors, HMRC rarely opts to enforce through the County Court instead.

The main disadvantage of a County Court judgment is that it will affect your credit record. On the ‘plus’ side, there is a procedure to ask the court to order the debt to be paid by instalments, and County Courts can be quite sympathetic in allowing time to pay.

Most County Court actions are conducted purely by paperwork. It is unlikely that you will be required to attend a hearing.

There is no monetary limit on the amount that may be claimed by HM Revenue and Customs in the County Court.

What happens first

You should receive a County Court claim which lists the amounts claimed by the HM Revenue and Customs together with court costs.

The claim is accompanied by a response pack, which contains three forms:

• Defence and counterclaim
• Acknowledgement of service
• Admission

The first two forms are needed if you wish to contest the claim, and the third form to ask for time to pay (see below).

If you do nothing

If you do not respond at all within 14 days from the service of the claim, Debt Management and Banking can ask the court to enter judgment against you. You will then receive a document from the court stating that a judgment has been given for the amount claimed by HM Revenue and Customs, and that payment must be made 'immediately'.

If you do not pay in response to this demand, HM Revenue and Customs can request an order to obtain information, which requires you to attend Court and provide evidence of your means (ability to pay). If you ignore this order you may be imprisoned.

Alternatively, if HM Revenue and Customs can show that you have had the means to pay the judgment debt or any unpaid instalments under a judgment order, they may ask for a Judgment Summons to be issued. If the Judge accepts their evidence or you do not respond, this can also lead to imprisonment.
In both situations the prison sentence is given for 'contempt of court' (you have failed to comply with a Judge's order) and not for non-payment of tax.

In other situations if you do not pay an amount ordered under a judgment when it is due, HM Revenue and Customs can return to the court for other methods of enforcing the order. The court has various other powers, for example it may make:

- a third party debt (formally garnishee) order, requiring someone (such as a bank) who owes you money to pay this directly to HM Revenue and Customs, or
- an attachment of earnings order, requiring your employer (if you have one) to deduct a certain amount from each salary or wage payment and send this to the Revenue.

In practice however if local court action is unsuccessful and the debt is more than £2,000, the case will usually be referred to HM Revenue and Customs' Enforcement & Insolvency Service for consideration of bankruptcy proceedings (for more information, see Bankruptcy).

So you should never ignore a County Court claim.

Contesting the claim

If you think that the amount shown in the claim is wrong, you might feel encouraged to contest it in the County Court, using the Defence and the Acknowledgement of service forms contained in the response pack.

However, these are standard forms that are sent out by the County Court with claims for all kinds of debts, and the paperwork does not tell you that it is very difficult to contest a claim by HM Revenue and Customs successfully in the County Court. This is because Section 70 of the Taxes Management Act 1970 says that the certificates that will be produced by HM Revenue and Customs, stating that tax has been charged and has not been paid, must be accepted by the court as sufficient evidence that the tax is due. So there is hardly ever any point in contesting the amount through the court.

If you do think that no tax is due or that the figures on the claim are wrong, it is more sensible to take the matter up with HM Revenue and Customs directly (for more information, see If you think the amount is wrong). At the same time, ask Debt Management and Banking to delay asking the court to enter judgment. This can help to avoid the situation, for example, where HM Revenue and Customs obtains a judgment and it is later agreed that there was actually no tax to pay.

If, having looked into your case, HM Revenue and Customs accepts that there is nothing due, it should take no further action on the claim. If it accepts that there is just a small amount due, Debt Management and Banking may agree not to obtain a judgment if you can pay it fairly quickly.

Asking the court for time to pay

If you accept that you owe all or part of the amount claimed, and you do not have the means to pay it, then HM Revenue and Customs will want judgment entered against you. A court judgment can require payment immediately.

However, you can avoid a judgment requiring payment ‘immediately’ - and the risks of further enforcement or bankruptcy described above - by asking the court to make the judgment debt payable over a period of time.

This is done by completing the Admission form that comes in the response pack. You give details of your financial situation and make an offer to pay

• (usually) a certain amount each month, or
• (less often) the full amount by a specified date in the future,

After completing the Admission, you send it to HM Revenue and Customs at the address shown on the claim. This must be done within 14 days of the date the claim was served on you.

Debt Management and Banking will review the form, and must then pass it on to the County Court. If HM Revenue and Customs is not happy with the proposal you have made, it will advise the court of this, but it is for the court to decide the payments that will be ordered. And this will usually be done by the court staff without a hearing.

You will then receive a document from the court stating that a judgment has been given for the amount claimed by HM Revenue and Customs, and how payment must be made. The court may well order payment in accordance with what you offered on the Admission form.

Once judgment has been given, you must make payment in accordance with it. If you do, HM Revenue and Customs cannot take further enforcement action in relation to that debt. If you fail to do so, HM Revenue and Customs can take further enforcement action (see 'If you do nothing' above).

Practical points on Admissions

Sometimes it is advisable to complete an Admission while, at the same time, asking HM Revenue and Customs to re-examine the debt (see 'Contesting the claim' above). This is where you believe that just part of the tax claimed is due, and you cannot pay it immediately. It may take a while to agree the correct amount due and, if in the mean time HM Revenue and Customs has obtained a judgment for the full amount claimed, the debt due under the judgment is then reduced to reflect the correct amount due.

In many cases County Courts order payments at a level previously rejected by Debt Management and Banking in negotiations. So it is always worth completing an Admission if you want to pay by instalments, even if you cannot offer very much.

You should offer only what you can genuinely afford. If you offer more than you can manage, and the court makes an order for instalments at that level, and you then fail to meet the payments due, HM Revenue and Customs can take further enforcement action (see 'If you do nothing' above).

If HM Revenue and Customs obtains a judgment, this will include interest on tax up to the date of the judgment.

HM Revenue and Customs also reserves the right to claim interest, from the date of judgment up to the date of payment. This is not included in the judgment itself, but could be claimed in separate proceedings like any other tax debt.

If you cannot afford to make payments ordered under a judgment

The judgment may be given for payments which you cannot afford to make.

This may be, for example, because:

• you failed to respond to the claim and HM Revenue and Customs has obtained a judgment for payment 'immediately', or
• the judgment requires payment by instalments at a level that you can no longer afford, perhaps because your income has fallen or you have become unemployed.

Whatever the reason, you may apply to the court for a variation of the order, to reflect what you can afford to pay. The procedure is very similar to that for an Admission, described above, although a different form is used.

Administration orders

If:

• a County Court judgment has been given against you, and
• you have other debts, and
• your total debts are no more than £5,000

Under such an order, all your debts are brought together in one place, and you make a single monthly payment to the court, set at a level that you can afford, which is then paid to your creditors in proportion to the debts that they are owed. The court keeps 10% to cover its costs.

Once an Administration order has been given, your creditors may not take separate legal action for recovery of any debt included within it, or approach you directly for payment.

Note: The Tribunals, Counts and Enforcement Act 2007 has made changes to the law in this area which are gradually being introduced. These include Enforcement Restriction orders, debt relief orders and Changes to Administration orders. Where relevant, advice should be sought on these points.

Your credit record

When a judgment is entered in the County Court, details are included in the Register of County Court judgments, which is open for inspection by credit reference agencies and this will affect your ability to borrow money in the future.

When a debt due under a County Court judgment has been paid, you may apply to the Court for a certificate of satisfaction.

If the debt is fully paid within one month of judgment, the Court should ask for the judgment to be deleted from the Register of County Court judgments. If it is settled after more than one month, once a certificate of satisfaction has been issued, the word ‘satisfied’ should appear against the judgment on the Register.

Getting help

County Court claims, procedures and forms can be difficult and you may want to get help.

If there are problems relating to the amount of tax due, or negotiating with HM Revenue and Customs, and you cannot afford to pay an accountant or tax adviser, you may contact TaxAid. See How we may help.

Advice on court procedures and forms is available from Citizens' Advice Bureaux and law centres. County Court staff can also be very helpful.